Credit Shocks and Macroeconomic Fluctuations in Emerging Markets

30 Pages Posted: 26 Jun 2013

See all articles by Romain Houssa

Romain Houssa

CRED & CEREFIM, University of Namur

Jolan Mohimont

National Bank of Belgium

Chris Otrok

University of Missouri; Federal Reserve Banks - Federal Reserve Bank of St. Louis

Date Written: June 25, 2013

Abstract

In this paper, we examine the role of global and domestic credit supply shocks in macroeconomic fluctuations for Emerging Markets. For this purpose, we impose a set of zero and sign restrictions within a medium-scale Bayesian Vector Auto-Regressive model. Quarterly data from South Africa and G-7 countries in 1985-2010 show that credit supply shocks impact significantly on macroeconomic aggregates in these economies. However, credit supply shocks have played, on average, a less important role than credit demand shocks. Moreover, shocks originating from G7-countries are the main drivers of real activity in South Africa, although they played a marginal role in the 1996-1999 South African recession.

Keywords: credit shocks, developing countries, macroeconomic stabilization policies, sign restrictions, Bayesian VAR

JEL Classification: C510, C330, C150, C530, E300, E430, E520, N170

Suggested Citation

Houssa, Romain and Mohimont, Jolan and Otrok, Christopher, Credit Shocks and Macroeconomic Fluctuations in Emerging Markets (June 25, 2013). CESifo Working Paper Series No. 4281, Available at SSRN: https://ssrn.com/abstract=2284762 or http://dx.doi.org/10.2139/ssrn.2284762

Romain Houssa (Contact Author)

CRED & CEREFIM, University of Namur ( email )

8 Rempart de la Vierge
Namur, 5000
Belgium

Jolan Mohimont

National Bank of Belgium ( email )

Brussels, B-1000
Belgium

Christopher Otrok

University of Missouri ( email )

118 Professional Building
Columbia, MO 65211
United States

Federal Reserve Banks - Federal Reserve Bank of St. Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

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